Business deal a tax revenue boost

STOCKTON - With a 7-0 vote by the City Council on Tuesday night, Stockton brought a new business to town and boosted its projected sales tax revenue by nearly a quarter of a million dollars.

Roger Phillips/Record Staff Writer

STOCKTON - With a 7-0 vote by the City Council on Tuesday night, Stockton brought a new business to town and boosted its projected sales tax revenue by nearly a quarter of a million dollars.

The move will create some new jobs and provide a welcome bump for a city still struggling to recover after more than two years in Chapter 9 bankruptcy.

But a more significant aspect of the news is that it represents a step toward diversifying Stockton's economy, says Micah Runner, the city's director of economic development.

"This is about attracting new investment to the region," Runner said.

The council's vote completed a deal by the city to bring to Stockton the headquarters of Diesel Direct West, a company that provides on-site fueling services for trucks. The company is scheduled to move to Stockton from Sacramento in October.

The agreement would not have happened without the development by Runner's department of a sales tax incentive tailored to attract businesses like Diesel Direct, which has a client list that includes Coca-Cola, Pepsi and FedEx.

"It's a great thing for the city of Stockton," Tim Johnson, the vice president of Diesel Direct, said Wednesday. "Orange County has been doing this for quite a while.

"Remember when (Governor) Rick Perry was running around California trying to steal businesses and take them to Texas? He was doing the same (stuff). Cities are realizing a percentage of something is better than 100 percent of nothing."

The new sales tax incentive, adopted by the council in June, targets a variety of businesses, among them companies that distribute fuel, engage in Internet commerce, run call centers and manufacture medical devices.

To qualify for the incentive, businesses must generate at least $25 million in annual sales, create at least 10 full-time jobs, make at least a $50,000 capital investment in Stockton and operate within the city limits. They also must be new to Stockton and San Joaquin County.

The incentive will provide a sales tax rebate to qualifying companies, a rebate culled from a 1 percent portion of the newly generated revenue. Revenues from the recent Measure A and Measure W sales tax hikes are not part of the incentive, Runner said.

If a new business that qualifies for the incentive generates a minimum of $25 million in new sales, $250,000 of the resulting sales tax revenue will be split evenly between the business and the city. At $50 million in new sales, the business will get 65 percent of $500,000, with the city keeping the rest.

Diesel Direct estimates its annual sales at approximately $65 million. The city projects it will receive $227,500 annually in new sales tax revenue by providing the incentive that attracted Diesel Direct to Stockton. Johnson said Diesel Direct has not been receiving a sales tax incentive in Sacramento. The Stockton incentive will provide a projected $422,500 rebate to Diesel Direct.

Diesel Direct already has four employees at its Stockton location east of Highway 99 and north of Arch Road. Johnson said the company will have about 40 employees in Stockton once it relocates its headquarters to the city.

A second business soon may move to the city because of Stockton's new incentive. Negotiations are ongoing with another, undisclosed firm, Runner said.

Runner added that his department is working to develop new tools like the tax incentive that attracted Diesel Direct as part of an effort to develop new tax revenue as Stockton prepares for its hoped-for exit from bankruptcy.

The city's Diesel Direct revenue is to be earmarked for additional economic development efforts. Councilwoman Kathy Miller said she is encouraged by the company's move to Stockton.

"It's a hopeful thing," Miller said. "When you craft these incentives, it's exactly what you're hoping for, that you're going to get one of those companies where they're on the fence and this makes the difference. I'm really pleased that we're reaping some benefits."

Contact reporter Roger Phillips at (209) 546-8299 or rphillips@recordnet.com. Follow him at recordnet.com/phillipsblog and on Twitter @rphillipsblog.

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